Tax Type
Retail Sales and Use Tax
Description
Telecommunications Services; Interactive Commercial Telephone Services
Topic
Taxability of Persons and Transactions
Date Issued
08-10-1992
August 10, 1992
Dear***
This will reply to your request for a ruling on behalf of * * * (Taxpayer) with respect to the Virginia Sales and Use Tax.
FACTS
The Taxpayer is implementing a switch-based interactive 900 commercial service which would permit the Taxpayer's customer (900 Sponsor) to receive telephonic communications from callers (End Users) located in all or a limited portion of the country. Through use of the 900 service, the 900 Sponsor will be able to offer various services or goods to the End Users for an advertised fee.
The Taxpayer will provide billing and collection services to the 900 Sponsor. A Local Exchange Carrier (LEC) will bill the End User charges along with other long distance traffic and remit the amounts collected to the Taxpayer. The Taxpayer will pay over to the 900 Sponsor the amounts billed, offset by amounts due the Taxpayer from the 900 Sponsor and amounts estimated to be uncollected amounts billed to End Users. The services and products of the Taxpayer include (1) conducting informal opinion polls, (2) providing recorded message service, (3) providing financial and information service, (4) providing interactive conversation service with persons or parties, (5) receiving donations for charitable organizations, and (6) receiving orders of goods from End Users, which are solicited by advertisement of the 900 Sponsor.
The Taxpayer has indicated a number of sales tax issues which they have presented for ruling. These situations will be addressed in the following paragraphs.
RULING
Taxation of Charges for Services
Va. Code § 58.1-603 imposes a sales tax on services which are expressly stated as taxable. Telephone communications services, billing and collection services, and the services indicated in 1 through 5 above are not among the service enumerated as subject to tax. Therefore, the Taxpayer is not required to charge the 900 Sponsor sales tax on the fees it charges for these services. In addition, the Taxpayer and the LEC would not be required to collect the tax on services billed and collected from End Users and remitted to the 900 Sponsor.
It should be noted, however, that under Virginia Regulations (VR) 630-10-87(C) equipment, apparatus, appliances, and facilities used directly in the rendition of these services will not qualify for the exemption provided by Va. Code § 58.1-608(3)(C) unless the cost of providing this service is recoverable through the rate making process. Also see Virginia Electric and Power Co. v. State Corporation Commission, 219 Va. 894 (1979).
Taxation of Retail Sales of Tangible Personal Property
The following responses relate to the sale of tangible personal property by 900 Sponsors when the Taxpayer's telephone lines are used to receive orders for tangible personal property.
Generally
The Virginia tax is computed based upon the "sales price' of an article. This term is defined in Va. Code § 58.1-602 as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale,' but excluding "transportation charges separately stated.'
VR 630-10-107 defines "transportation charges' as:
When the 900 Sponsor is a Dealer
If a 900 Sponsor is a dealer who is required to hold a certificate of registration under Va. Code § 58.1-613, it is liable for collecting and remitting the tax on all Virginia sales. Regardless of whether the 900 Sponsor is a registered dealer, no specific provision exists which would require the Taxpayer or the LEC to register and collect the tax when they merely provide billing and collection services to the 900 Sponsor and do not solicit the sale of tangible personal property.
Liability of the Taxpayer or the LEC Who Collects the Tax If the 900 Sponsor Does Not Discharge Its Sales Tax Liability
Va. Code § 58.1-625 states that "any dealer who neglects, fails, or refuses to pay or collect the tax . . ., either by himself or through his agents or employees, shall be guilty of a Class 1 misdemeanor.' Accordingly, when the 900 Sponsor, receives and refuses to pay taxes collected by the Taxpayer or the LEC, the 900 Sponsor will be liable for taxes collected from End Users and not remitted to the Department. However, under the provisions of Va. Code § 58.1-612(B)(8), in the event that the Taxpayer or LEC undertakes the collection and the remittance of the tax on behalf the 900 Sponsor to the Department, the Taxpayer or the LEC will be considered a "dealer' whose liability for the tax is identical to that of the 900 Sponsor who is a dealer. In such cases, the Taxpayer and LEC should register to be a dealer.
Liability in Cases Where Taxes are Undercollected from End User
Va. Code § 58.1-625 provides that the tax "shall be paid [to the Commonwealth] by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge. Thereafter, such tax shall be a debt from the purchaser.' Therefore, if the Taxpayer or the LEC are registered dealers and have collected and remitted the tax to the Department on behalf of the 900 Sponsor, they become liable for any liability in excess of the taxes collected and remitted.
Liability in Cases Where Taxes Are Overcollected from End User
Va. Code § 58.1-625 provides that "all sums collected by a dealer . . . shall be deemed to be held in trust for the Commonwealth.' The section further provides that any erroneously collected tax that has not been refunded or credited to the purchaser is to be remitted to the Tax Commissioner. Therefore, if the Taxpayer or LEC, as dealers, collect tax from the End User and remits it to the Department on behalf of the 900 Sponsor, the Taxpayer or the LEC become liable for all taxes overcollected. Once they have remitted the overcollected amount to the Department of Taxation, there will be no further liability to the 900 Sponsor, the Taxpayer or LEC. However, VR 630-10-107 provides that a dealer may request a refund of taxes erroneously collected and remitted to the Department if appropriate refunds or credits have been issued to the dealer's customers.
Please contact the department if you need further information.
Sincerely
W.H. Forst
Tax Commissioner
Dear***
This will reply to your request for a ruling on behalf of * * * (Taxpayer) with respect to the Virginia Sales and Use Tax.
FACTS
The Taxpayer is implementing a switch-based interactive 900 commercial service which would permit the Taxpayer's customer (900 Sponsor) to receive telephonic communications from callers (End Users) located in all or a limited portion of the country. Through use of the 900 service, the 900 Sponsor will be able to offer various services or goods to the End Users for an advertised fee.
The Taxpayer will provide billing and collection services to the 900 Sponsor. A Local Exchange Carrier (LEC) will bill the End User charges along with other long distance traffic and remit the amounts collected to the Taxpayer. The Taxpayer will pay over to the 900 Sponsor the amounts billed, offset by amounts due the Taxpayer from the 900 Sponsor and amounts estimated to be uncollected amounts billed to End Users. The services and products of the Taxpayer include (1) conducting informal opinion polls, (2) providing recorded message service, (3) providing financial and information service, (4) providing interactive conversation service with persons or parties, (5) receiving donations for charitable organizations, and (6) receiving orders of goods from End Users, which are solicited by advertisement of the 900 Sponsor.
The Taxpayer has indicated a number of sales tax issues which they have presented for ruling. These situations will be addressed in the following paragraphs.
RULING
Taxation of Charges for Services
Va. Code § 58.1-603 imposes a sales tax on services which are expressly stated as taxable. Telephone communications services, billing and collection services, and the services indicated in 1 through 5 above are not among the service enumerated as subject to tax. Therefore, the Taxpayer is not required to charge the 900 Sponsor sales tax on the fees it charges for these services. In addition, the Taxpayer and the LEC would not be required to collect the tax on services billed and collected from End Users and remitted to the 900 Sponsor.
It should be noted, however, that under Virginia Regulations (VR) 630-10-87(C) equipment, apparatus, appliances, and facilities used directly in the rendition of these services will not qualify for the exemption provided by Va. Code § 58.1-608(3)(C) unless the cost of providing this service is recoverable through the rate making process. Also see Virginia Electric and Power Co. v. State Corporation Commission, 219 Va. 894 (1979).
Taxation of Retail Sales of Tangible Personal Property
The following responses relate to the sale of tangible personal property by 900 Sponsors when the Taxpayer's telephone lines are used to receive orders for tangible personal property.
Generally
The Virginia tax is computed based upon the "sales price' of an article. This term is defined in Va. Code § 58.1-602 as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale,' but excluding "transportation charges separately stated.'
VR 630-10-107 defines "transportation charges' as:
- charges for delivery from the seller to the purchaser, commonly known as "transportation-out,' and include postage or common carrier charges. Transportation . . . charges do not include . . . handling charges.
When the 900 Sponsor is a Dealer
If a 900 Sponsor is a dealer who is required to hold a certificate of registration under Va. Code § 58.1-613, it is liable for collecting and remitting the tax on all Virginia sales. Regardless of whether the 900 Sponsor is a registered dealer, no specific provision exists which would require the Taxpayer or the LEC to register and collect the tax when they merely provide billing and collection services to the 900 Sponsor and do not solicit the sale of tangible personal property.
Liability of the Taxpayer or the LEC Who Collects the Tax If the 900 Sponsor Does Not Discharge Its Sales Tax Liability
Va. Code § 58.1-625 states that "any dealer who neglects, fails, or refuses to pay or collect the tax . . ., either by himself or through his agents or employees, shall be guilty of a Class 1 misdemeanor.' Accordingly, when the 900 Sponsor, receives and refuses to pay taxes collected by the Taxpayer or the LEC, the 900 Sponsor will be liable for taxes collected from End Users and not remitted to the Department. However, under the provisions of Va. Code § 58.1-612(B)(8), in the event that the Taxpayer or LEC undertakes the collection and the remittance of the tax on behalf the 900 Sponsor to the Department, the Taxpayer or the LEC will be considered a "dealer' whose liability for the tax is identical to that of the 900 Sponsor who is a dealer. In such cases, the Taxpayer and LEC should register to be a dealer.
Liability in Cases Where Taxes are Undercollected from End User
Va. Code § 58.1-625 provides that the tax "shall be paid [to the Commonwealth] by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge. Thereafter, such tax shall be a debt from the purchaser.' Therefore, if the Taxpayer or the LEC are registered dealers and have collected and remitted the tax to the Department on behalf of the 900 Sponsor, they become liable for any liability in excess of the taxes collected and remitted.
Liability in Cases Where Taxes Are Overcollected from End User
Va. Code § 58.1-625 provides that "all sums collected by a dealer . . . shall be deemed to be held in trust for the Commonwealth.' The section further provides that any erroneously collected tax that has not been refunded or credited to the purchaser is to be remitted to the Tax Commissioner. Therefore, if the Taxpayer or LEC, as dealers, collect tax from the End User and remits it to the Department on behalf of the 900 Sponsor, the Taxpayer or the LEC become liable for all taxes overcollected. Once they have remitted the overcollected amount to the Department of Taxation, there will be no further liability to the 900 Sponsor, the Taxpayer or LEC. However, VR 630-10-107 provides that a dealer may request a refund of taxes erroneously collected and remitted to the Department if appropriate refunds or credits have been issued to the dealer's customers.
Please contact the department if you need further information.
Sincerely
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner